Steel and cement production also gathered momentum, rising at a three-month high rate of 7.2% and a four-month peak of 5.5%, respectively. File.
| Photo Credit: K. Ananthan

Output from India’s eight core sectors grew 6.1% in July, rebounding from a blip in June when growth had slid to a five-month low of 5.1%, as per data released by the Commerce and Industry Ministry on Friday (August 30, 2024).

The Ministry had earlier pegged June’s core sectors’ growth at 4%, the lowest in 20 months, and the revision was largely driven by a sharp revision in steel output numbers, which now reflect a 6.7% growth compared with a 27-month low of 2.7% estimated earlier. Electricity generation numbers were also revised for June to show a 8.6% rise, compared with 7.7% estimated earlier.

In July, electricity production slipped to a 6-month low growth pace of 7%, while natural gas production contracted for the first time in well over a year, shrinking 1.3%. Coal output growth dropped to 6.8%, the lowest in at least 13 months.

Crude oil production continued to drop for the third straight month, with the decline deepening to 2.9% from a year ago. Despite these weakening trends, the Index of Core Industries or ICI got a fillip from a 6.6% jump in refinery products, the fastest rise in nine months, and refinery products rising at a seven-month high 5.3%.

Steel and cement production also gathered momentum, rising at a three-month high rate of 7.2% and a four-month peak of 5.5%, respectively.

The ICI constitutes a tad over 40% of the Index of Industrial Production (IIP). IIP growth had slid to a five-month low of 4.2% in June, but the significant revision in the core sectors’ index for the month, suggests an upgrade is likely when the National Statistical Office releases the July IIP numbers on September 12.

The textile sector grew 9.8% in May, after months of sluggishness. File
| Photo Credit: M. Periasamy

India’s goods exports grew 9.1% to $38.13 billion in May, while imports rose 7.7% to $61.91 billion, Commerce Secretary Sunil Barthwal said on Friday, stressing that things are looking “more optimistic for foreign trade this year”. Even the textiles sector recorded a healthy growth of nearly 10% in May “after several months of sluggishness”, he noted.

However, despite exports growing faster than imports, the merchandise trade deficit surged to a seven-month high of $23.78 billion in May. This was 5.5% higher than the deficit recorded in May 2023, and 24.5% over April’s trade gap of $19.1 billion, which in turn was the highest in four months. Compared with April, May’s import bill was 14.4% higher, while the value of exports rose 8.9%.

Asked if the rising trade deficit could pose a problem, Mr. Barthwal told The Hindu that the trend must be seen in the context of India growing faster than the world, insisting that goods trade deficits should not be viewed in isolation.

High growth, high demand

“Our economy is growing over 7%, while the global economy is growing at about 2.6% so there will always be higher demand from our country for imports of certain kinds of items. When your economy is growing faster than the world, then obviously there will be these twin effects — higher domestic demand will mean less exportable surplus, and your requirements for imports from the rest of the world will be higher than the world’s requirements from you,” he noted.

“The deficit trends will depend on two factors — import substitution and the rate of economic growth. But I don’t consider trade deficit per se as a bad thing, as long as you have foreign investment coming in through FDI, foreign exchange coming in, and you are balancing it through other means. Moreover, if our services exports are growing, we should not be unnecessarily worried about merchandise trade deficit alone,” the Commerce Secretary asserted.

The top Commerce official also highlighted the healthier 7.4% growth in exports of engineering goods in May, with double-digit increases in several segments, including electronics (23%), drugs and pharma products (10.45%), and plastics and linoleum (16.6%).

“We hope this trend should continue this year and also hope that there should be no more geopolitical conflicts and no more disruptions in major global shipping routes,” Mr. Barthwal said.

‘Deficit driven by oil’

Imports of gold hit a three-month high of $3.33 billion in May, although this was 9.7% lower than the gold import bill a year ago. Gold imports had tripled year-on-year in April to $3.11 billion. The value of silver imports shot up by over 400%, while the growth in imports of pulses (181.3%), transport equipment (31.9%), and petroleum (28.1%) also contributed to widening the chasm between exports and imports.

ICRA chief economist Aditi Nayar reckoned that 71% of the month-on-month surge in the trade deficit was driven by the net oil balance. While petroleum imports were $19.95 billion in May, the export figure stood at $6.77 billion.

“With the deficit enlarging by $6 billion in April-May 2024 relative to last year, we expect the current account deficit to rise to around 1.5% of GDP in this quarter from about 1.1% of GDP in the same quarter of 2023-24,” Ms. Nayar said.

Representational image of the seal of the Board of Governors of the United States Federal Reserve System
| Photo Credit: AP

United States Federal Reserve officials will likely make official what’s been clear for many weeks: With inflation sticking at a level above their 2% target, they are downgrading their outlook for interest rate cuts.

In a set of quarterly economic forecasts they will issue after their latest meeting ends, the policymakers are expected to project that they will cut their benchmark rate just once or twice by year’s end, rather than the three times they had envisioned in March.

The Fed’s rate policies typically have a significant impact on the costs of mortgages, auto loans, credit card rates and other forms of consumer and business borrowing. The downgrade in their outlook for rate cuts would mean that such borrowing costs would likely stay higher for longer, a disappointment for potential homebuyers and others.

ALSO READ | Recalcitrant jumbo: Editorial on inflation

Still, the Fed’s quarterly projections of future interest rate cuts are by no means fixed in time. The policymakers frequently revise their plans for rate cuts — or hikes — depending on how economic growth and inflation measures evolve over time.

But if borrowing costs remain high in the coming months, they could also have consequences for the presidential race. Though the unemployment rate is a low 4%, hiring is robust and consumers continue to spend, voters have taken a generally sour view of the economy under President Joe Biden. In large part, that’s because prices remain much higher than they were before the pandemic struck. High borrowing rates impose a further financial burden.

The Fed’s updated economic forecasts, which it will issue Wednesday afternoon, will likely be influenced by the government’s May inflation data being released in the morning. The inflation report is expected to show that consumer prices excluding volatile food and energy costs — so-called core inflation — rose 0.3% from April to May. That would be the same as in the previous month and higher than Fed officials would prefer to see.

ALSO READ | Rationale behind raising interest rates

Overall inflation, held down by falling gas prices, is thought to have edged up just 0.1%. Measured from a year earlier, consumer prices are projected to have risen 3.4% in May, the same as in April.

Inflation had fallen steadily in the second half of last year, raising hopes that the Fed could achieve a “soft landing,” whereby it would manage to conquer inflation through rate hikes without causing a recession. Such an outcome is difficult and rare.

But inflation came in unexpectedly high in the first three months of this year, delaying hoped-for Fed rate cuts and potentially imperiling a soft landing.

In early May, Chair Jerome Powell said the central bank needed more confidence that inflation was returning to its target before it would reduce its benchmark rate. Powell noted that it would likely take more time to gain that confidence than Fed officials had previously thought.

Last month, Christopher Waller, an influential member of the Fed’s Board of Governors, said he needed to see “several more months of good inflation data” before he would consider supporting rate cuts. Though Mr. Waller didn’t spell out what would constitute good data, economists think it would have to be core inflation of 0.2% or less each month.

Mr. Powell and other Fed policymakers have also said that as long as the economy stays healthy, they see no need to cut rates soon.

“Fed officials have clearly signaled that they are in a wait-and-see mode with respect to the timing and magnitude of rate cuts,” Matthew Luzzetti, chief U.S. economist at Deutsche Bank, said in a note to clients.

The Fed’s approach to its rate policies relies heavily on the latest turn in economic data. In the past, the central bank would have put more weight on where it envisioned inflation and economic growth in the coming months.

Yet now, “they don’t have any confidence in their ability to forecast inflation,” said Nathan Sheets, chief global economist at Citi and a former top economist at the Fed.

“No one,” Mr. Sheets said, “has been successful at forecasting inflation” for the past three to four years.

U.S. Ambassador to India Eric Garcetti during the 20th Indo-US Economic Summit, in New Delhi on September 26, 2023
| Photo Credit: ANI

India and the US need to strive towards a more ambitious and frictionless bilateral trade relationship, U.S. Ambassador to India Eric Garcetti said in New Delhi on Tuesday.

Speaking at the 20th Indo-U.S. Economic Summit organised by the Indo-American Chamber of Commerce, Mr. Garcetti lauded the recently concluded G-20 Summit in New Delhi, saying India has demonstrated its global leadership through the “most successful” G-20 in the history of the organisation.

The theme of the 20th Indo-U.S. Economic Summit is ‘Sharing ideas and potential for a sustainable partnership between India and the U.S. for the next 25 years’.

“The goal that we should be setting for each other is how can we be more ambitious. Not just settle for another deal, not just settle for as we have done in the last few months bringing down the retaliatory tariffs and trade disputes between our countries. That’s not good enough.

“I think we need to close our eyes and dream of what this relationship can be like even more than we would imagine today. How can we create a frictionless relationship?” Mr. Garcetti said.

Noting that there is a need to do away with even the smallest of friction between the two countries in terms of trade, he called for a reduction of tariffs and the creation of a more predictable regulatory environment.

He also pitched for a robust agriculture trade between India and the U.S.

“This is a great agricultural country and so is the United States. We want India to be one of our top three markets in the world. Here, the productivity in dairy and other areas has levelled off,” Mr. Garcetti said. He congratulated India on the successful landing of Chandrayaan-3 on the southern pole of the Moon.

The Ambassador said that both countries are now looking at partnerships in the commercial space segment.

He stressed the importance of sharing technology and co-development of technologies in sectors like defence, in which India and the U.S. already have strong ties.

Representational image of crude oil barrels ready to be transported.
| Photo Credit: AP

The government has cut the windfall profit tax on crude oil produced in the country while the levy on exports of diesel and aviation turbine fuel (ATF) has been hiked, an official notification said.

The tax, levied in the form of special additional excise duty or SAED, on domestically produced crude oil was reduced to ₹6,700 per tonne from ₹7,100 a tonne.

SAED on the export of diesel was increased to ₹6 per litre from ₹5.50 a litre and on jet fuel or ATF to ₹4 per litre from ₹2, the notification said.

SAED on export of petrol will continue to be zero.

The new tax rates came into effect from Saturday, the order dated September 1, said.

India first imposed windfall profit taxes on July 1 last year, joining a growing number of nations that tax supernormal profits of energy companies. At that time, export duties of ₹6 per litre ($12 per barrel) each were levied on petrol and ATF and ₹13 a litre ($26 a barrel) on diesel.

A ₹23,250 per tonne ($40 per barrel) windfall profit tax on crude oil produced by companies such as Oil and Natural Gas Corporation (ONGC) was also levied.

The tax rates are reviewed every fortnight based on average oil prices in the previous two weeks.

A windfall tax is levied on domestic crude oil if rates of the global benchmark rise above $75 per barrel. Export of diesel, ATF and petrol attract the levy if product cracks (or margins) rise above $20 per barrel.

Product cracks or margins are the difference between crude oil (raw material) and finished petroleum products.

International crude oil prices averaged $86.43 per barrel in August, up from $80.37 in the preceding month and $74.93 a barrel in June.

The levy on domestic crude oil dropped to nil in the first half of April as international crude oil prices fell but was back in the second half in step with a rise in rates.

Levy on diesel became nil in April but the levy was brought back in August. Levy on ATF became nil in March and was brought back in second half of August.

The export tax on petrol was scrapped in the very first review.

Crude oil pumped out of the ground and from below the seabed is refined and converted into fuels like petrol, diesel and aviation turbine fuel (ATF).

Reliance Industries Ltd, which operates the world’s largest single-location oil refinery complex at Jamnagar in Gujarat, and Rosneft-backed Nayara Energy are primary exporters of fuel in the country.

File picture of workers loading LPG cylinders on to a truck.
| Photo Credit: Reuters

Public sector Oil Marketing Companies (OMCs) have slashed the price of 19 kg commercial LPG gas cylinders by ₹158, according to the sources. The new prices will be effective from today. In Delhi, the retail price of the 19 kg commercial LPG cylinder will be ₹1,522. 

On August 29, the price of domestic LPG was reduced by ₹200 by the Centre, which Prime Minister Narendra Modi termed a “Raksha Bandhan gift” to the sisters of the country. Monthly revisions for both commercial and domestic LPG (liquefied petroleum gas) cylinders occur on the first day of each month, with the new rates becoming effective from September 1.

Earlier in August, the prices of commercial LPG cylinders were slashed by ₹99.75 by the OMCs. In July, the prices of commercial LPG gas cylinders were increased by ₹7 each.

Before this hike, there had been two consecutive price cuts for commercial LPG cylinders in May and June. While in May OMCs reduced the price of a commercial LPG cylinder by ₹172, in June it was reduced by ₹83.

In April, too, their prices were reduced by ₹91.50 per unit.

Petroleum and oil marketing companies had on March 1 this year hiked the prices of commercial LPG cylinders by ₹350.50 per unit and domestic LPG cylinders by ₹50 per unit.

Official rhetoric on India becoming a $5 trillion dollar economy has resumed, with the Prime Minister’s remarks at the BRICS conference last week. However, these claims are riddled with problems.
| Photo Credit: Reuters

Addressing the BRICS Business Forum Leaders’ Dialogue at Johannesburg last week, Prime Minister Narendra Modi said, “Soon, India will become a $5 trillion economy.” In 2018, a working group under the Ministry of Commerce and Industry set 2025 as a deadline for achieving the same. The economic slowdown induced by the COVID-19 pandemic has upended the target deadline.

With the revival of the economy now, and the general elections on the horizon, official rhetoric on this count has resumed. While addressing the nation on the 77th Independence Day from the Red Fort, Mr. Modi noted that India was the world’s 10th largest economy in 2014, but now stands at fifth spot. He has also invoked a “third term” in office saying that India would be among the world’s top three economies by then.

Even if one ignores the political hubris and sidesteps the serious debate over the methodological rigour of India’s GDP estimates, the problems with the Prime Minister’s economic claims are manifold.

First, Mr. Modi is using nominal Gross Domestic Product (GDP) estimates to make claims about the size of the Indian economy relative to other national economies. This is wrong. Nominal GDP gives an estimate of the national output for a year at the prices prevailing in that year. However, the actual size of the economy is reflected in real GDP, which is adjusted for price changes. In other words, India can become a $5 trillion economy in nominal terms through high inflation, even without any significant changes in the economy’s output. It is for this reason that national governments, the United Nations, and other international agencies such as the World Bank and International Monetary Fund base their economic growth estimates on real GDP (price adjusted) and not nominal GDP (estimated at current market prices).

Second, international comparisons between national GDP estimates get further complicated because of exchange rate conversions. Researchers have long held that market-based exchange rates are not the appropriate way in which national GDPs can be converted into a common currency for comparison because of the existence of a substantial share of non-tradable commodities in national outputs as well as the innate volatility in market-determined exchange rates.

Going by nominal GDP, the Indian economy, valued at $3.39 trillion in 2022, ranked fifth in the world, as Mr. Modi said. However, in terms of real GDP, India’s economy in 2022 was $3 trillion and ranked sixth in the world. PPP-based GDP estimates (in terms of purchasing power parities estimated through price surveys of a common basket of commodities across countries) show that the Indian economy’s size was over $10 trillion in 2022. India’s PPP-based GDP has consistently expanded since the 1990s. India surpassed Germany in 2005 to become the fourth largest economy in the world and Japan in 2009 to become the third largest, a rank that has remained unchanged till date. 

Table 1 | The table shows the rankings for the 10 largest economies in the world in terms of PPP-based GDP, real GDP, and nominal GDP in 2022.

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The third problem with Mr. Modi’s narrative regarding the size of India’s economy attaining new heights under his regime relates to its socioeconomic implications. Studies in economic development start with the premise that per capita income and output are the key indicators of a country’s standard of living, not the total size of the economy. Having surpassed China as the most populous country in the world, India’s per capita income (Gross National Income or GNI) and GDP continue to remain the lowest among all the countries in G-20, as depicted in Table 2. 

Table 2 | The table shows per capita income and GDP per capita for G20 countries.

This means that India is the poorest country in the G20 by per capita income. This is not to deny the importance of economic growth in advancing economic development but to underline the fact that being the most populous country in the world today, India needs to become not just the third largest but the largest economy in the world before it can claim to have attained a dignified living standard for the majority of its people. With almost equal populations in 2021, China’s per capita income (at 2017 prices) was PPP $17,504 while India’s was PPP $6,590; Brazil’s per capita GNI was PPP $14,370 and South Africa’s PPP $12,948.

Chart 3 | The chart shows the pre-tax national income by income groups in BRICS in 2021.

India’s low per capita income is further compounded by the skewed distribution of that income: 21.7% of its pre-tax national income went to the top 1% of the population in 2021 while only 13% went to the bottom 50% of the population (Chart 3). While in Brazil (9.1%) and South Africa (5.8%) the share of national income for the bottom 50% was even lower than India, China (13.7%) and Russia (15.7%) had higher income shares. This unfair reality of the top 1% cornering a disproportionate share of the national income in emerging economies gets concealed by official rhetoric on trillion-dollar GDPs and their growth.

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If India aspires to catch up with China or the U.S. in terms of GDP and per capita income, it needs to move beyond rhetoric and augment resource mobilisation and real investments in physical and human capital to levels much higher than what has been achieved till date.

Prasenjit Bose is an economist and activist. Samiran Sengupta and Soumyadeep Biswas are data analysts at CPERD Pvt Ltd, Kolkata

Source: World Development Indicators Databank, the Huma Development Report 2021-22, and World Inequality Database

Also read | Data | India’s GDP was on a downward slope even before COVID-19 wreaked havoc

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A scene at wholesale vegetable market Azadpur Mandi, in New Delhi. File
| Photo Credit: Sushil Kumar Verma

Retail inflation resurged in July to hit 7.44% from 4.87% in June, with consumers facing a sharp 11.5% spike in food prices. This is the highest pace of retail inflation since April 2022 and the first time since September 2022 that price rise has been over 7%.

Vegetable prices soared 37.3% while cereals and pulses became over 13% costlier, lifting the food bill by over 12.3% for urban consumers, while rural consumers encountered 11% food inflation. Rural residents however faced a higher overall inflation rate of 7.63% in July, as per the National Statistical Office. The Consumer Price Index was up 2.9% from June’s levels, while food prices were up 6.7% month-on-month.

July’s inflation print, which surpassed most economists’ estimates, breaks a four-month streak below the central bank’s 6% tolerance threshold for consumer price rise and threatens to upend its recent 6.2% average inflation projection for the July to September quarter.

A slight let-up in tomato prices this month may help cool the inflation trend a little in August, but elevated pulses, spices (up 21.6%), milk (up 8.34%) and cereal prices remain a concern along with a below-normal monsoon outlook for this month and patchy progress on the crop sowing front.

“In its latest credit policy, the Reserve Bank of India [RBI] said it will be ready to act if conditions warrant action. Would 7% inflation for two successive months cause the trigger to be pulled?” said Bank of Baroda chief economist Madan Sabnavis. An interest rate hike cannot be ruled out even though its probability is still low, he noted.

However, hopes of interest lower rates may be deferred further, with rating firm ICRA expecting the earliest cut around the second quarter of 2024-25 with “a fairly shallow” rate cut cycle of about 50-75 basis points from the current levels. One basis point equals 0.01 per cent.

Wholesale prices

Wholesale prices remained in deflationary mode for the fourth month in a row in July, but prices of food and primary articles spiked by over 7.5%, narrowing the overall price dip sharply to -1.36% from the 92-month low of -4.1% recorded in June.

At the wholesale level, inflation in primary food articles hit 14.3%, the highest in almost a decade with vegetable prices shooting up 81.1% in July, compared to June, and 62.1% higher than a year ago. Milk, wheat and cereals prices spurted over 8% year-on-year, while pulses and paddy prices rose over 9%.

Within food articles, potato and fruits were the only items to cool from last July’s levels, dropping 24.4% and 8.9%, respectively, but potato prices were 8% higher compared to June. Onions also became costlier, rising nearly 28% from June 2023 and 7.13% from July 2022. While these spikes were offset somewhat by lower wholesale prices for non-food items, there was no such relief at the consumer price level.

The only major relief for consumers came from edible oils, whose prices dropped 16.9% in July, even as rise in spends on personal care and effects remained sticky at 9% and healthcare inflation remained virtually unchanged from June’s 6.2% mark.

“The data for food prices for early August are not very promising, and we expect the headline CPI inflation to print above the 6.5% mark in August, before cooling off materially in September,” reckoned ICRA chief economist Aditi Nayar.

“While the vegetable price shock may not reverse adequately before the next harvest, rainfall has been deficient in August so far, which is likely to put upward pressure on food prices, amid the lags in kharif sowing across some crops,” she added.

The Wholesale Price Index (WPI) moved up almost 2% from June’s levels, with primary articles rising over 8% and the Food Index up a sharp 7.1%. Manufactured products’ prices fell 2.5% while fuel and power prices fell a sharp 12.8% year-on-year, but on a sequential basis, the deflation in these two segments was just 0.3% and 0.5%, respectively. More than 80% of the uptick in headline WPI in July vis-à-vis June was driven by primary food articles, ICRA said.  

Image used for representational purposes only.
| Photo Credit: Special Arrangement

India’s gross revenues from the Goods and Services Tax (GST) hit a three-month high to cross ₹1.65 lakh crore in July. However, at 10.8%, it was the slowest uptick in collections since July 2021 compared to revenues from the same month last year.

Revenues from domestic transactions and services imports grew 15% in July, which marked the fifth occasion that GST revenues have crossed the ₹1.6-lakh-crore mark during a month. Sequentially, July’s collections, for transactions undertaken in June, were 2.2% higher than the previous month’s GST kitty.

The Finance Ministry did not disclose the trend for GST collections on import of goods, but back-of-the-envelope calculations indicate that there was a 0.8% decline in July from a year ago. Integrated GST collections on goods imports dropped by 0.43% to ₹41,239 crore, while GST Compensation Cess levies on goods imports dropped 15.6% to ₹840 crore.

Overall GST Compensation Cess levies, which will continue till at least March 2026 to repay market borrowings made amid the pandemic to compensate States, grew 7.9% in July to touch nearly ₹11,780 crore.

Central GST or CGST collections in July stood at ₹29,773 crore, while State GST (SGST) yielded ₹37,623 crore. The total IGST collection came to ₹85,930 crore, with around 52% of that revenue coming from domestic transactions.

The Hindu Editorial | Reset time: On GST revenue growth

“The government has settled ₹39,785 crore to CGST and ₹33,188 crore to SGST from IGST. The total revenue of the Centre and the States in the month of July 2023 after regular settlement is ₹69,558 crore for CGST and ₹70,811 crore for the SGST,” the Finance Ministry said.

While overall domestic revenues grew 15%, as many as 18 States recorded 15% or higher growth, while 11 States grew at a slower pace. 

Strife-torn Manipur was the only State to record a contraction, with a 7% drop in revenues. However, the north-eastern States of Mizoram (47%), Meghalaya (27%), Sikkim (26%), recorded the highest growth in revenues, followed by Delhi (25%), Uttar Pradesh (24%) and Tripura (23%).

At the other end of the spectrum, Nagaland, with a 3% rise in revenues, Chhattisgarh with 4%, and Andhra Pradesh (5%) saw the weakest growth, followed by Gujarat and Telangana, both of which clocked a 7% growth.

The Hindu Editorial | An incomplete reform: on six years of the Goods and Services Tax  

“The past trend of six key States generating almost 60% of the nationwide GST collections continues in the current month as well,” noted MS Mani, partner at Deloitte India, adding that compliance drives from the Revenue department were yielding results with steady revenue trends.

The ₹1.6-lakh-crore monthly collection mark may be the new norm for GST revenues, said Abhishek Jain, partner and national head for indirect tax at KPMG, who said revenues might rise further with the upcoming festival season and the approaching “normal period of limitation” for 2017-18 assessments.

Mandatory e-invoicing for all firms with a turnover of ₹5 crore, which kicks in this month, is also expected to bolster revenues, though it may pose some transition challenges for smaller businesses.

“Smaller taxpayers may have trouble embracing the new compliance paradigm, but it would ultimately expedite operations, improve transparency, and encourage more transactions with larger businesses, despite the transition’s potential difficulties,” said Saloni Roy, partner at Deloitte India. 

A view of a steel plant. India’s core sectors’ output surged at a five-month high pace of 8.2% in June, as per data from the Commerce and Industry Ministry, led by a 21.9% spike in steel output 
| Photo Credit: The Hindu

India’s core sectors’ output surged 8.2% in June, the fastest pace in five months, buoyed by a 21.9% spike in steel output and nearly double-digit rise in coal and cement production, as per data released by the Commerce and Industry Ministry on Monday.

Seven of the eight core sectors, which constitute 40.3% of the Index of Industrial Production (IIP), registered an uptick in June, compared to just six in May, when their total output had increased 5%.

Also Read | Key infra sector growth slows down to 4.3% in May

Economists expect the IIP growth, which had hit a three-month high rate of 5.2% in May, to clock a 4%-6% rise in June as well. Coming on the back of a 13.1% rise in output last June, the 8.2% growth in June was noteworthy, they said.

Crude oil was the only sector in the red, marking the 13th successive month of contraction in output, although the extent of decline eased to 0.6%, the lowest amid this streak. Refinery products grew at the fastest pace in nine months at 4.6%, while electricity (up 3.3%) and natural gas (up 3.6%) output growth touched their highest levels in four and five months, respectively.

Also Read | Production rises 5.2%, led by infrastructure and construction goods

Coal production rose 9.8%, the fastest since March, while Cement production rose 9.4%, the slowest in three months. Fertilizers production rose by 3.4%, the lowest pace in at least a year.

On a month-on-month basis, steel output was 1.15% higher in June, while cement production rose 1.7%. However, four sectors clocked a sequential decline from May levels — fertilizers (-5.35%), refinery products (-3.5%), coal (-3.1%) and crude oil (-3%).

‘Broad-based growth’

Core sectors’ overall growth was broad-based and reflected the upturn in infrastructure spends, noted Bank of Baroda chief economist Madan Sabnavis.

“The government push in infrastructure, especially in roads, is reflected by the strong numbers for steel and cement. The cumulative growth in these two sectors has been in double-digits in the first quarter of this year, even though last year had seen a strong performance too, creating a high base,” Mr. Sabnavis said.

ICRA chief economist Aditi Nayar said the tardy onset of the monsoon contributed to an improved performance for sectors like electricity and coal.

“With the boost seen in mining and electricity from a dryer-than-normal June, we expect the IIP growth to print at 4%-6% in June, in spite of the moderation in the year-on-year performance of several available high frequency indicators for the month,” she averred.